Regulatory Capital
Basel/CECL-aligned capital and provision estimates under climate-adjusted scenarios.
What This Means for You
Align with regulatory guidance and avoid over-capitalizing. We calculate inputs for Basel III capital and CECL provisioning using your actual climate risk—so you hold the right amount of capital and provision, not more than you need.
How It Works
Compute Expected Loss: EL = PD × LGD × EAD (peril-adjusted).
Compute Capital: regulatory capital add-on as function of stress loss minus EL.
CECL: lifetime loss provisioning based on scenario-weighted PD/LGD curves.
Key Capabilities
When You'll See Results
CECL EL over loan life (10–30 yrs), re-measured quarterly.
Capital scenarios 1–3 yrs, reported quarterly.
Technical Details
Formulas
Expected Loss (EL) = PD × LGD × EAD
PD (Probability of Default) = Baseline Rate × Disaster Multiplier × (1 - CLIMA Reduction Factor)
LGD (Loss Given Default) = 36.6% average, 56.3% at 75th percentile (NFIP data)
EAD (Exposure at Default) = Loan Amount × (1 + LTV Adjustment Factor)
Regulatory Capital = Base Capital (8%) × Risk Weight × (1 + Climate Buffer)
Risk Weight = max(0.2, min(2.0, (10 - CLIMA Score) / 5))
Climate Buffer = max(0, (5 - CLIMA Score) × 0.01)
CECL Provision = max(0.01, (10 - CLIMA Score) × 0.002)
Total Capital Requirement = Base Capital × Risk Weight + LTV Adjustment + Climate Buffer (capped at 25%)
Example
$500k loan in high-risk area (CLIMA Score 3.0)
Default rates from Freddie Mac (15.09M loans): 6.3% disaster, 1.3% non-disaster
CLIMA PD
1.3% (Freddie non-disaster; CLIMA-filtered → lower disaster exposure)
Traditional PD
6.3% (Freddie disaster counties; no CLIMA filtering)
LGD
56.3% (high risk area)
EAD = $500k × 0.65 (LTV)
$325k
CLIMA EL = 1.3% × 56.3% × $325k
$2,378
Traditional EL = 6.3% × 56.3% × $400k
$14,188
EL Reduction = $14,188 - $2,378
$11,810 (~83% reduction)
Risk Weight = (10 - 3.0) / 5
1.4 (140%)
Climate Buffer = (5 - 3.0) × 0.01
2%
Total Capital = 8% × 1.4 + 2%
13.2%
Capital Savings vs Traditional
$2,100 per $100k loan
Ready to Get Started?
Upload your portfolio or schedule a demo to see Regulatory Capital in action.